3 April 2020
Global Tax Alert
News from EY Law
EY Tax News Update: Global
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Australia to require
Foreign Investment
Review Board approval
for most foreign
investment transactions,
including internal
reorganizations
On 29 March 2020, the Australian Government announced with immediate
effect that:
• All proposed foreign investments into Australia will require approval from
the Foreign Investment Review Board (FIRB), regardless of value (i.e., the
monetary threshold is temporarily $0 for foreign investment), including
internal reorganizations.
• The above applies to investments where the specific investor will acquire a
20% ownership interest or increase a pre-existing ownership interest of 20%
or more, except for the media sector where the acquisition threshold is 5%
ownership or more, and importantly includes internal reorganizations (e.g.,
where an ownership interest of 20% or more is transferred within a group).
• However, the above does not apply to existing agreements entered into
before 10:30 pm AEDT 29 March 2020 where the investment has not been
completed and that investment either had or did not require FIRB approval.
• The permitted time period for FIRB to consider any application for approval is
now 6 months and not 30 days.
The above changes are expected to be temporary due to the current COVID-19
pandemic and Australia is still open for foreign investment however it is not
known how long these new procedures will remain.
In the absence of advance approval, FIRB has the power to unwind transactions
and impose penalties.
2 Global Tax Alert
Implications
These changes introduced by FIRB may impact foreign
investments into Australia under the following conditions:
• A foreign investor will acquire a 20% or more ownership
interest (direct or indirect).
• A foreign investor will acquire at least an ownership of 5%
or more in a business in media sector.
• A foreign investor will increase a pre-existing ownership
interest of 20% or more.
All monetary thresholds that previously applied have been
temporarily reduced to $0.
Such transactions, including internal reorganizations (e.g.,
where an ownership interest of 20% or more is transferred
within a group), may now require prior FIRB approval,
regardless of value or the nature of the foreign investment.
By way of example, prior to this change, acquisitions in
non-sensitive businesses only required FIRB approval where
the acquisition threshold was more than AU$275 million/
AU$1,192 million (depending on the investor’s country).
This represents a significant change that may impact deals
currently underway.
The FIRB has since confirmed that the new $0 threshold
does not apply to transactions where an agreement was
entered into before 10:30 pm AEDT 29 March 2020 but
the acquisition itself has not yet occurred (e.g., due to
unmet conditions in the agreement). In other words, if the
transaction documents have been signed before 10:30 pm
AEDT 29 March 2020 and that transaction either had or did
not require FIRB approval, the transaction may proceed.
By temporarily reducing the foreign investment thresholds,
the Australian Government seeks to gain appropriate
oversight over all proposed foreign investments during
this time.
The Australian Government has indicated this is not an
investment freeze, Australia is still open for business and
investments will continue to be approved where these align
to the Australian national interest.
In the absence of advance approval, FIRB has the power to
unwind transactions and impose penalties.
Depending on the stage of the agreement, this may
immediately impact deals involving both external
acquisitions and internal reorganizations where the
20% (or 5% for media sector) ownership (direct or indirect)
threshold is met in relation to an Australian company/
Australian subsidiary.
Accordingly, businesses should evaluate the impact of this
change on any existing and proposed transactions, including
internal reorganizations to ensure this approval is applied
for in advance.
The FIRB will continue to work with the Australian
Taxation Office (ATO) to review the potential tax impact of
nonresidential foreign investment proposals. As part of its
review, the ATO will generally impose standard taxation
conditions and where appropriate additional or specific
taxation conditions. The standard tax conditions are aimed
at encouraging overall adherence to Australian taxation law
through tax compliance and transparency with the ATO.
EY Law can assist in preparing and submitting these
applications.
 Global Tax Alert 3

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Australia), EY Law, Sydney

• Alex Worner alex.worner@au.ey.com
• Amber Cerny amber.cerny@au.ey.com
• Rebecca Scarano rebecca.scarano@au.ey.com

Ernst & Young (Australia), EY Law, Melbourne

• Lucas Vosch lucas.vosch@au.ey.com

Ernst & Young (Australia), EY Law, Perth

• Sonia Chee sonia.chee@au.ey.com

Ernst & Young LLP (United States), Australian Tax Desk, New York
• David Burns david.burns1@ey.com
• Kevin Ngo kevin.ngo3@ey.com

Ernst & Young LLP (United Kingdom), Australian Tax Desk, London
• Naomi Ross naomi.ross@uk.ey.com
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